SBA loans up in Wichita district

Matt Graham is one of 264 recipients of Small Business Administration-backed loans in the agency's Wichita district so far this year.

And with his $300,000 loan, the owner of Home Buddy at 3510 W. Central was able to obtain some operating capital to grow his 5-year-old company and hire one worker.

"In order to bring in new products and services you have to have the capital," he said.

Demand for SBA-backed loans in the Wichita district — which covers Sedgwick and 76 other Kansas counties — has significantly increased in the SBA's fiscal year, which ends Sept. 30.

The total dollar amount of loans from Oct. 1 to July 31 was 66 percent higher than the same time a year earlier, according to data from the SBA's Wichita District office. The number of loans was up 36 percent during that same period.

And because of those loans, recipients said they would add or retain 2,373 workers.

The dollar figures include loans made from the SBA's America's Recovery Capital Loan Program. That program, launched through the American Recovery and Reinvestment Act of 2009, provides short-term loans up to $35,000 to businesses that are viable but struggling because of the economy.

In the current fiscal year, 46 ARC loans totaling $1.5 million were made in the Wichita district. Those loans accounted for 2.4 percent of the $62.9 million in SBA backed loans made through July 31.

Wayne Bell, SBA Wichita district director, said he thinks ARC loans were part of the reason for the year-over-year increase in SBA-backed loans.

So, too, were other incentives offered through the recovery act, such as 90 percent guarantees to banks making SBA-backed loans and the waiving of loan fees.

"Where exactly this would fall (without the incentives) there's no way of knowing," Bell said.

But Bell said he and his staff have been working harder at getting word out to banks and entrepreneurs about the recovery act incentives and SBA's traditional loan programs.

"We did expect a significant increase with the recovery act incentives went into play," he said.

Graham said when he needed a loan he didn't automatically think of an SBA loan. But his bank did.

"We went to the bank with the plan for a loan, and they said, 'Hey, how about we do this with an SBA loan?' " Graham said.

He said when he went looking for the loan, his main goal was to get more capital so he could add new equipment that would in turn enable Home Buddy to attract more business.

Graham's five-employee company offers services to seniors, such as wireless help buttons, electronic medication dispensers and remote health monitoring devices.

The loan allowed him to stop leasing some equipment at an 18 percent interest rate, he said. There also was enough money to hire an in-house marketer, he said.

"It freed up a lot of operational money," Graham said.

Bankers said they are seeing an increase in SBA loans, too. It's not just them pushing business customers to SBA-backed loans, said Steve Carr, president of Community Bank of Wichita.

"Some people will come in with predetermined thinking that they want an SBA loan," Carr said.

Carr said his bank will first look at trying to get a business into a conventional loan. But with increasingly tighter lending standards and a slow economic recovery, getting them into a conventional loan can sometimes be harder, he said.

"I think especially in these difficult times and because of the guarantees the SBA (program) allows us to continue to make loans that might be a little bit of a reach," Carr said. "(The loans) still have to make a sense from a cash flow and collateral standpoint. The SBA doesn't necessarily negate those requirements. But... it does allow us to maybe do some deals that are just on the line."

Lyndon Wells, executive vice president at Intrust Bank, said SBA-backed loans are a "credit enhancement tool available to banks." But he said Intrust bankers also first try to get a business into a non-SBA backed loan because, with the exception of the recovery act incentives, "there is more paperwork and expense to the borrower by securing an SBA loan."

Bell, the SBA official, said he thinks the SBA loan numbers will continue to increase in the next fiscal year, even though the ARC program, ends at the end of the month.

"There's a lot of activity in our area, a lot of innovation, a lot of creative folks," Bell said. "I really think as our economy continues to recover that we'll see loans numbers that should be pretty close to the loan numbers we saw prior to 2008."

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